UniFirst Beats Q1 Estimates But Cautious Outlook Prompts Downgrade
Shares face pressure as company guides to lower end of revenue forecast, citing slowing trends in its core laundry business.
UniFirst Corp. (NYSE: UNF) reported fiscal first-quarter results that surpassed analyst expectations, but a tempered outlook for the remainder of the year and a subsequent analyst downgrade applied pressure to the company’s shares.
The Wilmington, Massachusetts-based provider of workplace uniforms and facility services posted strong top- and bottom-line growth for the quarter ending in December. According to its official announcement, consolidated revenues climbed 9.5% year-over-year to $593.5 million. Net income saw a significant 24.6% increase to $42.3 million, resulting in a diluted earnings per share of $2.26, a 24.9% improvement from the prior year.
The results benefited from solid top-line growth and lower-than-anticipated costs related to major technology and brand-building initiatives that have been a focus for the company. “We are pleased with the solid start to our new fiscal year,” said Steven Sintros, UniFirst President and CEO, in a statement.
Despite the strong quarterly performance, the company’s forward guidance signaled potential headwinds. While UniFirst reiterated its full-year revenue forecast of $2.415 billion to $2.435 billion, management cautioned that results would likely trend toward the lower end of that range. The company attributed the conservative stance to “recent trends in our Core Laundry Operations during the latter portion of our first quarter.”
That caution appeared to be driven by challenges in pricing, customer retention, and wearer levels, which could weigh on organic growth in the coming months. The tempered outlook overshadowed the quarterly beat and prompted a notable reaction from the analyst community.
Following the report, analysts at Baird downgraded UniFirst stock to “Neutral” from a previous “Outperform” rating, setting a price target of $185. The move reflected concerns that the emerging softness in the company’s core business could limit upside potential, despite the solid start to the fiscal year.
UniFirst, a key player in the industrial and professional services sector with a market capitalization of approximately $3.59 billion, provides uniforms and protective clothing for a wide range of industries. The company’s financial health is often seen as a barometer for employment and business activity in the sectors it serves.
For the full fiscal year, the company maintained its guidance for diluted earnings per share to be between $6.52 and $7.16. Investors will now be closely watching whether the slowdown in its core laundry operations is a temporary issue or the beginning of a more persistent trend that could impact profitability through the remainder of the fiscal year.